Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.7%), Nasdaq Composite (+0.6%), and Dow Jones Industrial Average (+1.3%) all set new record highs this morning on broad-based strength, as cooling labor market data outweighed a slightly hotter-than-expected August CPI report. 

Total CPI rose 0.4% in August (Briefing.com consensus: 0.3%), while core CPI matched expectations at 0.3%.

Simultaneously, initial jobless claims spiked by 27,000 to 263,000 (Briefing.com consensus: 240,000), underscoring weakening labor conditions.

With the market fully pricing in a 25-basis point rate cut at next week's FOMC meeting, investor enthusiasm was driven by increased odds of further cuts in October and December.

According to the CME FedWatch tool, there is a 91.0% probability of at least a 25 basis point cut to 3.75-4.00% at the October FOMC meeting versus 80.9% yesterday, and an 85.4% probability of at least a 25 basis point cut to 3.50-3.75% at the December FOMC meeting versus 74.5% yesterday.

That backdrop has been particularly supportive of smaller-cap stocks, with the Russell 2000 (+1.4%) and S&P MidCap 400 (+1.2%) outperforming.

The S&P 500 Equal-Weight Index (+1.0%) also leads the market cap-weighted S&P 500 (+0.8%), reflecting broad participation beyond mega-cap growth (the Vanguard Mega Cap Growth ETF is up 0.5%).

Nine S&P 500 sectors trade in positive territory, led by the health care sector (+1.6%), which has seen solid performances across its managed care names after Centene (CNC 35.00, +3.72, +11.91%) reaffirmed its FY25 EPS guidance.

A healthy advance in Tesla (TSLA 360.57, +12.78, +3.67%) seats the consumer discretionary sector (+1.6%) with a similar gain, while the materials (+1.5%), financials (+1.3%), real estate (+1.1%), and industrials (+1.1%) sectors also hold gains wider than 1.0%.

Only the communication services (-0.1%) and energy (-0.1%) sectors hold slight losses.

The market's focus has been centered around this morning's economic data and its perceived effect on monetary policy amid a lack of corporate headlines today.

Elsewhere on the policy front, CNBC reported that the Senate is planning a vote on Monday regarding Stephen Miran's nomination as Fed Governor. If the Senate clears the nomination, Mr. Miran would be able to vote at the September 16-17 FOMC meeting.

Reviewing today's data:

• August CPI 0.4% (Briefing.com consensus 0.3%); Prior 0.2%, August Core CPI 0.3% (Briefing.com consensus 0.3%); Prior 0.3%
  • The key takeaway from the report (for Main Street) is that food prices were starkly elevated in August (+0.5%), as were shelter (+0.4%), apparel (+0.5%), transportation services (+1.0%), and gasoline (+1.9%) prices.
• Weekly Initial Claims 263K (Briefing.com consensus 240K); Prior was revised to 236K from 237K, Weekly Continuing Claims 1.939 mln; Prior was revised to 1.939 mln from 1.940 mln
  • The key takeaway from the report is rooted in the eye-opening initial jobless claims print, which will be construed in the market's mind as a weakening labor market signal and another basis for the Fed to cut rates in September, as well as in October and December.